Supreme Court Decision 2015Du51415 (No. 14, 2016)

Appellate Court 2015No1966 ( October 31, 2015)

Calculation of the income amount attributed to the domestic permanent establishment of a foreign corporation.

The corporate tax imposed on the recruitment fees on the premise that all of the amounts except the value-added tax belongs to the permanent establishment in the Republic of Korea without distinguishing the amount of income belonging to the domestic fair business establishment of the plaintiff who is a foreign corporation is illegal.

Article 7 of the Korean Tax Convention

2016Nu56051 Revocation of Disposition of Imposing Corporate Tax, etc.

○○○ ○○ ○○ ○○ ○○○ ○○ ○○ ○○ ○○

○ Head of tax office

Seoul Administrative Court Decision 2013Guhap9854 decided April 18, 2014

on 15, 2017

October 20, 2017

1. The part of the conjunctive claim of the first instance judgment against the plaintiff shall be revoked.

2. The corporate tax of 8,027,59,530 won for the business year 207 to the plaintiff on March 2, 201, 207, of 4,67,728,45 won, corporate tax of 2,687,616,016,231 won for the business year 2008, and 631,374,374,674 won for the business year 940, 6369, 2063, 207, 207, 309, 207, 309, 207, 207, 309, 207, 309, 207, 309, 204, 305, 207, 309, 207, 309, 207, 309, 205, 294, 207, 30948, 207, 209

3. The total cost of the litigation, including the cost of participation, shall be borne by the Plaintiff and the Intervenor, and the remainder by the Defendant, respectively.

And Grounds for Appeal

1. Purport of claim

First, the defendant's imposition of corporate tax for the business year 207 8,027,59,530 (including additional tax), corporate tax for the business year 2008 2,687,616,840 (including additional tax for 1,018,60,609), 948,374,540 (including additional tax for 316,461,866) for the business year 206, 305, 207, 207, 309, 207, 207, 309, 207, 209, 309, 207, 306, 461, 207, 209, 306, 207, 309, 207, 205, 207, 208, 309, 306, 207, 2094

Preliminaryly, the Defendant imposed corporate tax of 8,027,59,530 (including additional tax of 3,359,831,075) on the Plaintiff on March 2, 201; corporate tax of 207; of 2,687,616,840 (including additional tax of 1,018,600; 609); of 94,374,540 (including additional tax of 316,461,8666); of 207, 208, 369, 207, 369, 207, 207, 209, 306, 207, 309, 207, 209, 306, 209, 306, 205, 207, 207, 205, 308, 306, 394, 20637, 294

2. Purport of appeal

The same shall apply to paragraphs 1 and 2.

1. Scope of the judgment of this court;

According to the records of this case, the court of first instance dismissed the plaintiff's main claim and dismissed the remainder of each disposition of this case among the conjunctive claims, and the defendant did not appeal and only the plaintiff filed an appeal as to the part against them. The court of first instance prior to remand dismissed the appeal as to the plaintiff's main claim and accepted the plaintiff's claim as to the part against the plaintiff among the conjunctive claims of the court of first instance. The plaintiff did not appeal, and only the defendant did filed an appeal as to the part against which the plaintiff lost. The Supreme Court reversed and remanded the judgment of the court prior to remand. Accordingly, the main claim is excluded from the object of the judgment of the court of first instance, and only the part excluding the additional part among the conjunctive claims (see Supreme Court Decision 201Da6213, Dec. 24, 2001) is subject to the judgment of this court (see Supreme Court Decision 201Da62213, Dec. 24,

2. Details of the disposition;

This Court's explanation is identical to the corresponding part of the reasoning of the judgment of the court of first instance (from No. 4 to No. 78 of the 4th page, from No. 8 of the 7th page, and from No. 1 of the 1 of the 1 of the 1), except for the following matters, and therefore, this Court's explanation is accepted in accordance with Article 8 (2) of the Administrative Litigation Act

○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ (hereinafter “Plaintiff”) and thereafter, “○○○○○○○” in the fourth sentence of the first instance judgment is both the Plaintiff’s “Plaintiff”.

○ 제1심 판결 제4쪽 제6행의 "원고 ▲▲▲그룹"을 "▲▲▲그룹"으로 고친다.

○, the 8th instance court's decision of the first instance court, "the supplementary intervenor of the plaintiffs", is regarded as "the supplementary intervenor of the plaintiff".

○ The 13th judgment of the first instance court is the "rawlsing fee" of the fourth 13th judgment.

○ In Part 3 of Part 5 of the fifth Do Judgment of the first instance court, “if the laws and regulations of the Republic of Korea are amended,”

If the law is amended, it shall be understood as "if the law is amended."

3. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

(i) the first argument;

이 사건 납세고지서에는 상호(성명), 즉 납세의무자가 '▲▲▲그룹 국내고정사업장 임○○'이라고 기재되어 있어 이 사건 납세고지서만으로는 이 사건 각 처분이 원고에 대한 부과처분인지 전혀 알 수 없고, 오히려 상호(성명)에 '▲▲▲그룹'이 포함되어 있어 ▲▲▲그룹이 납세의무자인 것으로 이해되는 점, 임○○은 원고와 ▲▲▲그룹의 대표자를 겸하고 있어 이 사건 납세고지서의 상호(성명)란에 임○○이 기재되어 있다는 사정만으로 납세의무자가 원고와 ▲▲▲그룹 중 누구인지 특정할 수 없는 점, 피고는 원고에 대한 세무조사 과정에서 보조참가인과 이 사건 계약을 체결한 당사자가 원고라는 사실을 알고 있었으므로 조금만 주의를 기울였더라면 원고를 이 사건 납세고지서상 납세의무자로 명시할 수 있었던 점 등에 비추어 보면, 이 사건 납세고지서는 납세의무자의 동일성을 식별할 수 없는 경우에 해당한다. 따라서 이 사건 각 처분은 적법한 납세고지가 없어 위법하다.

(ii) the second argument;

In order for a permanent establishment to exist in the Republic of Korea, there should be a fixed place of business in the Republic of Korea, and there should be an essential and important business activities through a fixed place of business. However, the office of this case is merely a temporary offer by the supplementary intervenor to all the regular casino business operators, including the plaintiff, using the surplus space of the casino business place. The office of this case did not limit the right to use the office of this case. ② The plaintiff recruited customers directly or through many subordinate business operators in Asia except China, Taiwan, the Philippines, Hong Kong, etc. under the contract of this case, and transferred them to the supplementary intervenor of this case for 20 years after receiving from the supplementary intervenor of this case's 20th anniversary of its entry into the casino. The office of this case was operated by the supplementary intervenor of this case for 20 years from the above 20th anniversary of its entry into the casino office of this case, and it was operated by the intervenor of this case's 20th entry into and departure from the office of this case.

(iii) the third assertion;

A) Under Article 7 of the Convention between the Republic of Korea and the Republic of the Philippines for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (hereinafter “Tax Treaty”), a foreign corporation or non-resident’s business activities are imposed separately on domestic source income when they were conducted in a foreign country and in the Republic of the Republic of the Republic of Korea. Business income may be imposed only on profits belonging to the instant office. The expenses incurred for the instant office’s purpose shall be deducted regardless of the place of occurrence. However, without distinguishing the income belonging to the Plaintiff’s domestic permanent establishment, the Defendant, without distinguishinging the income belonging to the Plaintiff’s domestic permanent establishment, appears to be the income amount attributed to the instant office, the entire amount of the Plaintiff’s fee, excluding value-added tax, from the recruitment fee received from the Intervenor, was deemed to be the income amount attributed to the instant office. However, this is merely merely to provide the Plaintiff’s business activities conducted in the instant office outside of Korea, and rather,

B) The Plaintiff’s services provided to the Intervenor under the instant contract are the Plaintiff’s foreign head office and mainly abroad, not the Plaintiff’s permanent establishment, and thus, the part of the value-added tax in each of the instant dispositions is unlawful.

C) Inasmuch as the part of roller structure that the Plaintiff paid to the customer for the purpose of construction is reverted to the customer, it should be excluded from the Plaintiff’s revenue or deductible expenses, and so long as its nature is limited, it should be excluded from the value-added tax base.

B. Relevant statutes

This Court's explanation is identical to the corresponding part of the judgment of the court of first instance (No. 10-15, No. 21-23 of the judgment of the court of first instance). As such, Article 8(2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act are cited.

(c) Fact of recognition;

This Court's explanation concerning this part is the same as the corresponding part of the judgment of the court of first instance (as stated in the corresponding part of the judgment of the court of first instance from 10th to 16th, 13th, 18th, c., hereinafter referred to as "the corresponding part of the judgment of the court of first instance"), and therefore, it is cited in accordance with Article 8 (2) of the Administrative Litigation Act, and the main sentence of

○ In the first instance court Decision 10th 17th 17th 200, “Plaintiffs ○○○” and thereafter “Plaintiffs ○○○○.”

Both "Plaintiffs" are different from "Plaintiffs".

○ The Do 12th Do 12th Do Do 25th Do 25th Do 25th Do as an intervenor.

○○ Decision 13 of the first instance court Decision 13 is "Lurururure" at the 8th day of the 13th day ruling.

D. Determination

1) As to the first argument

The reason why this court's explanation concerning this part is as follows: "Plaintiff ○○○○" is "Plaintiff"; "Plaintiff Doese Doese Group" is both dismissed as "Bebbale Group"; "the plaintiff Doese Doese Group" is the same as the corresponding part of the judgment of the court of first instance [the corresponding part of the first argument of the first instance [the first argument of the first instance court No. 13, No. 20 through No. 15, No. 15, No. 15, 200]; and therefore, Article 8 (2

A claim shall be quoted in accordance with the main sentence of Article 420 of the Civil Procedure Act.

2) As to the second argument

A) Article 5(1) of the Tax Treaty provides that "permanent establishment for the purpose of this Convention" means a fixed place of business in which the business of an enterprise is wholly or partially carried on, and in paragraph (4) provides that "permanent establishment, notwithstanding the provisions of the preceding paragraph of this Article," "permanent establishment" shall be deemed not to include: (e) "the maintenance of a fixed place of business for the purpose of carrying on other activities having the preliminary or auxiliary nature for the enterprise"; and (f) "the maintenance of a fixed place of business for the purpose of carrying out only the activities referred to in subparagraph (a) through (e)"; and (f) "the possession of a fixed place of business for the purpose of combining those activities referred to in subparagraph (e) of the preceding paragraph, provided that the overall activities of a fixed place of business due to such combination must be preliminary or auxiliary."

In light of the language, purport, etc. of the above provisions, to establish a permanent establishment in the Republic of Korea, where an employee or a person under instructions of the Switzerland corporation performs essential and important business activities, not preliminary or auxiliary business activities, through a fixed place of business, such as domestic buildings, facilities, or equipment, etc., for which the Switzerland corporation has the authority to dispose of or use, it should be determined by comprehensively taking into account the nature and scale of the business activities, the importance and role of the entire business activities, etc.

B) In full view of the following facts in Eul evidence Nos. 4 and 6-1 and 2 of Eul evidence Nos. 6-2, and the testimony of Lee Jae-won before remand and the fact-finding results to the head of Gangnam-gu Office prior to remand, the following facts can be acknowledged.

(1) According to the instant contract, the contents of the Plaintiff and the Intervenor’s main services are as follows. In other words, the Plaintiff recruited tickets (a person who visits a casino, junket and casino) in Asian areas, other than China, including China, Taiwan, Hong Kong, the Philippines, and Japan, and then sent them to Korea, and arranged the Intervenor to operate roll games at the casino business site of the auxiliary intervenor. The auxiliary intervenor performs the role of designating and guiding the customer’s casino business site VIP room and providing him/her with convenience facilities other than the game room, etc.

(2) According to the instant contract, the Plaintiff paid 70% of the turnover of casino (the amount lost by a customer) generated from the machines and diskettes recruited and sent by the Intervenor to the Intervenor as above. In addition, the Intervenor agreed to take 30% of the turnover of casino generated from the machines and diskettes sent by the Plaintiff as profits in return for providing casino business places and withstandrs, and bear 30% of the turnover of roller. (However, the Intervenor paid to the Plaintiff 30% of roller and delivered it to the Plaintiff to the customer.) Meanwhile, Article 6(2) of the instant contract provides that “The Plaintiff shall either achieves the amount of internship’s annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual total annual amount of KRW 250 billion or KRW 300 billion, or that the condition of the instant contract shall not be met after consultation with the Intervenor.”

(3) The key point of the Plaintiff’s specific activities in accordance with the instant contract was to recruit diskettess for the Asian regions other than China, including China, Taiwan, Hong Kong, the Philippines, Japan, etc. In addition, most of the activities to recruit individual tickets were conducted through various subordinate ticket business operators in each country. In addition, the Plaintiff recruited diskettes to receive from the tickets recruited to the accounts of Meet that the Plaintiff or the Plaintiff’s affiliated company, before leaving the Republic of Korea, in order to offer games at the casino business place in which Meet was operated by Meet, and then transferred Meets to the accounts of the Plaintiff or the Plaintiff’s affiliated company to the Hong Kong of the Intervenor’s Hong Kong, while securing the amount of money to be provided in preparation for the case where Meet was lost in the game process so that Meet was requested to provide loans on credit, and also performing settlement work and customer management business to attract customers in the future.

(4) In the Republic of Korea, the Plaintiff, within the assistant casino’s casino business place, had employees, provided chips to the chips recruited by the Plaintiff, or confirmed sales generated in the rolling game operated by the assistant intervenor. The Plaintiff performed the business of reservation of airline tickets and boarding instruction, the business of guiding the assistant intervenor’s casino business place at the airport, and the business of reservation and instruction of hotel and restaurant.

(5) From July 2007 to the end of July 2009, the Plaintiff handled the above domestic affairs at the assistant casino business site of the second floor of the building in Samsungdong 159, Gangnam-gu, Seoul, and the assistant intervenor had an office on the third floor by expanding the business site from the beginning of 2010 to the third floor of the same building. At the time of 2010, the instant office had seven books, seven computer, seven cash safe, one cash safe, one cash safe for keeping chip chips, three glnets, one glnet, and one glick chip store size, and 15 employees of the Plaintiff were working for three 1 day.

C) According to the above legal principles and the above factual basis as follows, ① Services provided by the Plaintiff to the Intervenor to the Intervenor is not limited to the Plaintiff’s solicitation and mediation overseas, but to provide various convenience to the Intervenor’s casino business site. Accordingly, the Intervenor’s final purpose is to raise sales in a certain amount of more than a certain amount of money. The Intervenor’s sales are directly linked to the amount of the Intervenor’s recruitment fee to be allocated from the Intervenor. ② Accordingly, the Plaintiff’s employees conducted various convenience services for the Intervenor’s game business without any inconvenience in the above casino business site. ③ In particular, it is directly necessary to increase the Intervenor’s sales revenue, ③ to deposit the above casino business site with the overseas account of the Plaintiff, etc. instead of directly causing large amount of gambling money in Korea, and thus, it constitutes an employee’s own part of the Plaintiff’s business activity in the instant case’s domestic business site. Therefore, the Plaintiff’s assertion that the Plaintiff’s business activity constitutes an employee’s own part of the Plaintiff’s instant contract.

3) As to the third argument

A) Since the tax authority has the burden of proving the corporate tax related to the corporate tax related to the Plaintiff's domestic permanent establishment, if it is possible to investigate and determine the real income in a foreign corporation's taxable income calculation method, it is reasonable to calculate the income belonging to the domestic business place among the domestic source income, and even if it is possible to estimate the income, it shall be in accordance with the treaty and the Corporate Tax Act, and the Enforcement Decree thereof. However, if a foreign corporation has a certain source of income but it is actually impossible to investigate and determine the actual cost in Korea due to the implementation of its income activities and the realization of income in Korea and abroad, the tax authority shall be bound to impose tax by calculating it so as to be close to the actual cost of income in Korea. The abstract provision of the tax treaty or the provisions of the Corporate Tax Act and the Enforcement Decree thereof (the application of the income standard rate or the business right type) are virtually impossible to calculate the income from sales transactions in the foreign corporation's special contract form, so the income belonging to the domestic business place among the domestic source income belonging to the foreign corporation can not be deemed unlawful in Korea by the ratio of 192.

In light of the above legal principles and the following circumstances revealed by the above facts, the part of corporate tax of each of the dispositions of this case imposed by the Plaintiff on the premise that all of the subscription fees received by the Plaintiff from the Intervenor except the value-added tax would be attributed to the Plaintiff’s domestic permanent establishment without distinguishing the amount of revenue belonging to the Plaintiff’s domestic permanent establishment from the revenue amount belonging to the Plaintiff’s domestic permanent establishment (not to decide on the expenses for the Plaintiff’s assertion of deduction from the revenue

(1) Article 7(1) of the instant tax treaty provides that "if an enterprise of a Contracting State is engaged in a business in the other Contracting State through a permanent establishment located in the other Contracting State, the profit of the enterprise shall be taxable only in that other Contracting State unless the enterprise is engaged in a business in the other Contracting State. If the enterprise is engaged in a business as mentioned above, only part of the enterprise's profit which may accrue to the said permanent establishment may be taxed on the other Contracting State." Article 7(2) provides that "if an enterprise of a Contracting State engages in a business in the other Contracting State through a permanent establishment located in the other Contracting State, it shall be deemed that the permanent establishment is engaged in the same or similar activity under the same or similar conditions and is assumed as an independent enterprise entirely independent of that enterprise, the profit expected to be acquired shall belong to the said permanent establishment in each Contracting State."

(2) The source of profit to be obtained by the Plaintiff and the Intervenor from the contract of this case is money that the Plaintiff recruited overseas by the Plaintiff to use in the casino business place of the Intervenor, and therefore, how much the amount of money would be paid depends on the business failure. As such, the key part of the service provided by the Plaintiff to the Intervenor pursuant to the contract of this case is to recruit overseas strawet so that the Plaintiff may engage in a rolling game in the said casino business place. However, the practical business of the Plaintiff is performed through a number of subordinate tickets overseas, and the customer management to continuously recruit strawets is also performed overseas, and the Plaintiff’s essential and core business is performed overseas, and most of the expenses are spent overseas.

(3) As seen earlier, even though the Plaintiff’s employees’ activities conducted in the instant office constituted the Plaintiff’s essential and important business activities, the amount of income accrued to the Plaintiff’s domestic permanent establishment under the instant contract is limited to the Plaintiff’s payment for the provision of chips and for the provision of services related to hotel, airport, casino business guidance, etc., and it is difficult to view that the Plaintiff’s activities are included in the Plaintiff’s payment for the provision of services related to the Plaintiff’s solicitation of tickets, the collection and delivery of chips, and the provision of services related to the above foreign country’s provision of services (the Defendant asserts to the effect that the Plaintiff’s above activities are preparation for the provision of services in Korea, but cannot be viewed as

(4) The Defendant asserts to the effect that it is practically impossible to divide the Plaintiff’s income amount attributed to the Plaintiff’s domestic permanent establishment and the Plaintiff’s income amount attributed to the Plaintiff’s foreign permanent establishment because the Plaintiff did not submit data for calculating the income amount attributed to the Plaintiff’s domestic permanent establishment, such as the corporate tax return and financial statements, which the Plaintiff reported to the Switzerland National Tax Service. However, in light of the fact that the recruitment commission received from the Intervenor from the Intervenor appears to be obvious that the Plaintiff’s revenue amount belongs to the Plaintiff’s foreign permanent establishment and that it would be reasonable, it

The same circumstance alone does not mean that all of the recruitment fees received by the Plaintiff from the Intervenor, excluding value-added tax, belongs to the Plaintiff’s domestic permanent establishment (the Defendant should estimate the amount of income attributed to the Plaintiff’s domestic permanent establishment in the most reasonable manner through additional investigations, verification, etc. despite the practical difficulties in his/her assertion).

B) As to value-added tax on the place of supply

Article 10(2)1 of the former Value-Added Tax Act (amended by Act No. 915, Jan. 1, 2010) provides that a place where a service is supplied or a place where goods, facilities, or rights are used. Thus, whether a transaction subject to the imposition of tax is a transaction subject to the imposition of tax should be determined on the basis of the place where the service is provided (see, e.g., Supreme Court Decision 2004Du7528, 7535, Jun. 16, 2006). Meanwhile, where a person who receives the service from a foreign corporation without a domestic place of business receives value-added tax on behalf of the supplier, a foreign corporation is not liable to collect and pay value-added tax, but a foreign corporation is liable to collect and pay value-added tax at the location of a domestic place of business (see, e.g., Supreme Court Decision 2014Du13812, Feb. 18, 2016)

First of all, the plaintiff is a foreign corporation with a domestic permanent establishment, which provides services in Korea, is liable to pay value-added tax at the location of the domestic permanent establishment.

Then, as to whether the Plaintiff is liable to pay value-added tax on all recruitment fees received from the Intervenor, it is difficult to view that the Plaintiff’s domestic permanent establishment has the liability to pay value-added tax on the provision of services related to the recruitment, collection and delivery of the Plaintiff’s ticket, and this is the same even if the Plaintiff’s employees’ activities conducted in the instant office constitute the Plaintiff’s essential and important business activities. Accordingly, the part of value-added tax on each of the instant dispositions, based on the premise that the Plaintiff’s employees are liable to pay value-added tax on all recruitment fees received from the Intervenor, is unlawful, based on the premise that the Plaintiff is liable to pay value-added tax on the entire recruitment fees received from the Intervenor.

C) As to the corporate tax and value added tax related to roller structure

In light of the following circumstances, Gap’s evidence Nos. 18 through 21, Eul’s evidence Nos. 6, 9, 15, and 16 (including various numbers) and the testimony of this ○○○○, the whole purport of the pleadings, and the following circumstances, it is reasonable to view that, in calculating the tax base of corporate tax and value-added tax, Rawls is not the price for the service provided to the supplementary intervenor by the plaintiff, but the plaintiff is required to pay 70% of the plaintiff’s 70% of the price for the service provided to the supplementary intervenor, and the supplementary participant must pay 30% of the 30% of the 30% price for the supplementary intervenor’s 10%

(1) In the instant contract, the Plaintiff and the Intervenor paid 70% of the amount of casino sales to the Plaintiff under the pretext of the recruitment fee, and the Plaintiff paid 1.7% of the amount of the intern’s amount to the scambling machine to the scambs, and 30% of the amount is borne by the Intervenor, and the remainder 70% is borne by the Plaintiff.

(2) According to the settlement details of the Plaintiff and the Intervenor, the Intervenor paid to the Plaintiff all of the roller structure agreed upon by the instant contract.

(3) In the case of Makao, in which rolling games are activated, Rawls was about 1.0% to 1.3% (current maximum lines are set at 1.2%). In the case of Korea, not only time and cost are high in the visit of Chinese customers who are mainly customers, but also in the case of casino size, it is not easy to attract customers under the same conditions as Makao. Therefore, if the Plaintiff recruited tickets and sent them to Korea, it is necessary to suggest more favorable conditions than the Mcar casino, and accordingly, the Plaintiff and the Intervenor agreed to pay 1.7% of the Maka amount by roller.

(4) Inasmuch as rollering is an essential element in rolling games, it is the money that the Plaintiff, a ticket business entity, may pay and not pay, but the money that ought to be paid to him/her, instead of the money of a mutually beneficial nature that may be able to pay and not pay. Therefore, if a roller fails to pay the originally agreed roller, the Plaintiff is bound to face a big difficulty in soliciting sket so it is difficult to deem that the Plaintiff agreed to pay the roller and did not pay it.

E. Sub-committee

Each disposition of this case is partially unlawful, and since the amount of tax is not calculated based on the data submitted in this case, each disposition of this case in this case must be revoked (see Supreme Court Decision 94Nu13527 delivered on April 28, 195).

4. Conclusion

Therefore, the part of the plaintiff's conjunctive claim is justified, and the part against the plaintiff among the part of the conjunctive claim of the court of first instance against the plaintiff (the part of the main claim of this case) is unfair, so it is revoked and it is so decided as per Disposition by the defendant to revoke the main claim of this case against the plaintiff.